HomeMy WebLinkAboutStaff Report 362-07City of Palo Alto
City Manager’s Report
TO:HONORABLE CITY COUNCIL
ATTN:FINANCE COMMITTEE
FROM:CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE:
SUBJECT:
OCTOBER 2, 2007 CMR: 362:07
TRANSIENT OCCUPANCY TAX INFORMATION RELATED TO
UPCOMING BALLOT MEASURE FOR NOVEMBER 6, 2007 GENERAL
ELECTION
This is an informational report and no Council action is required.
DISCUSSION
At its July 9, 2007 meeting, the Palo Alto City Council authorized placement of a ballot measure
on the November 6, 2007 general election to increase the City’s Transient Occupancy Tax (TOT)
from 10 to 12 percent. To notify Palo Alto voters of the forthcoming ballot measure, a Utility
Community Announcement message was printed on all September 2007 utility bills (See
Attachment A). The message refers readers to the City’s website for information about the
upcoming ballot measure on TOT. In addition, the website includes a fact sheet which highlights
additional TOT information (See Attachment B).
PREPARED BY"
~OYCE WHITE
Senior Financial Analyst
APPROVED BY:
~~-’~~ ~ ~EATS
] DIRECTOR, Administrati ve Serv’lc es
CITY MANAGER APPROVAL:
ASSISTANT CITY MANAGER
ATTACHMENTS:
Attachment A: TOT Ballot Measure Information
Attachment B" TOT Fact Sheet
CMR:362:07 Page 1 of l
Attachment B
A proposed change in Palo Alto’s Transient Occupancy Tax (TOT) rate, also re-
ferred to as the "hotel tax" will appear on the November 6, 2007 general election,
as a ballot measure, giving registered voters an opportunity to approve or disap-
prove a proposed 2 percent rate increase. Approval requires a 50 + 1 percent
simple majority vote.
1. Authority to Levy Tax
California Revenue and taxation Code (7280) authorizes the legislative body of
any city or county in the State of California to levy a tax on the privilege of occu-
pying a room, hotel room or other lodging establishment for a period of 30 days
or less.
TOT History
Palo Alto~s TOT was originally adopted as a general tax by Ordinance No. 2567
in July 1970. The tax is assessed by hoteliers on behalf of the City on transients
who stay in Palo Alto for 30 days or less. The initial 5 percent TOT was increased
to 6 percent in t 976 and was last increased in 1983 to its current rate of 10 per-
cent. The 2006-07 fiscal year average daily room rate for Palo Alto hotels is
$137. The average occupancy for fiscal year 2006-07 was 72 percent.
Rate Comparison
Palo Alto’s current tax rate of 10 percent is within the median range statewide
and slightly above the median rate of 9.75 percent locally. Most local cities, with
the exception of East Palo Alto, have TOT rates of 10 percent. Statewide TOT
rates range from 8 percent to a high of 15 percent. The proposed 2 percent
increase in the TOT rate will place Palo Alto above the local median rate of 9.75
percent.
Projected Revenue Increase
An increase in the TOT rate of 2 percent is predicted to increase net General
Fund revenues by approximately $1.2 million annually.
What is the Current Need?
The proceeds of the TOT as a general tax will be deposited in the City’s General
Fund which means that 100 percent of this revenue will go to the City and be
used for general governmental purposes such as, street and sidewalk repair and
other long-term infrastructure projects.
City of Palo Alto